Oil price, Union Jack/Egdon/Europa, Trinity. And finally…
WTI $66.27 +90c, Brent $69.46 +75c, Diff -$3.19 -15c, NG $3.11 +15c, UKNG 65.02p -3.42p
On the up again as oil continues to pick out the most bullish data segments, today Brent has broken the $70 barrier which to some has been an impossible ceiling. Amongst that bullish data is employment data from the UK which has come in better than forecast, the UK continued its opening up programme yesterday and in Europe albeit slowly, green shoots are beginning to appear.
Over in the States its way faster, the arguments over there are what to do with the pile of no-longer used masks and how quickly they will be back to normal. Take the Big Apple where subway swipes are now at a 14 month high, airlines are piling on the flights and Uber and Lyft are saying that rides are picking up at a rate of knots.
My favourite weekly stat of US retail gasoline prices are of course higher today and of course significantly affected by the Colonial Pipeline debacle where management kowtowed to ransom merchants last week. But demand was already better and overall US prices meant motorists paid $3.028 per gallon which was up 6.7 cents w/w, 17.3c m/m and $1.15 y/y. Interestingly the highest area remained the West Coast at $3.598 per gallon which is not such a big increase as in the eastern areas covered by the pipeline.
So, overall maybe Opec and the other agencies may be right and there could be a big 2H drawdown in stocks on the back of oil demand picking up sharply.
Union Jack Oil/Egdon Resources/Europa Oil & Gas
Union Jack (40%) as well as Egdon Resources (30%) and Europa Oil & Gas (30%) announce that all necessary consents have been received by the Operator, Egdon Resources for the commencement of the proppant squeeze operation at the Wressle oil production site.
The proppant squeeze operation is expected to optimise oil production from the Ashover Grit formation, one of the three productive reservoirs present, to a constrained rate of 500 barrels of oil per day gross (200 barrels per day net to Union Jack). Independent data, acquired by the JOA partners indicate that this predicted flow rate should be achievable post-proppant squeeze. The operation is expected to be completed and optimum oil production achieved during June 2021.
The Wressle-1 well has been on a 24 hour production test since 30 January 2021, with produced oil transported by road tanker to the Phillips 66 Humber refinery and sold under Egdon’s existing oil sales contract. Since the successful re-perforating exercise on the Ashover Grit reservoir where communication with the formation was achieved, increased oil production has been observed, exceeding JOA partner expectations, pre-proppant squeeze with high quality free flowing oil being produced and no water present.
Union Jack Executive-Chairman, David Bramhill commented:
“The Wressle development comprises a state-of -the-art, cutting edge, purpose-built, environmentally friendly surface facility. “The proppant squeeze operation is the final phase of achieving our targeted oil production level and generating optimum cash-flows from the Ashover Grit reservoir.
“Revenues, post-proppant squeeze, especially in this now strong oil price environment will have a dramatic effect on the cash generating capabilities of Union Jack going forward.”
Commenting on the news Mark Abbott, Managing Director of Egdon Resources said;
“We are delighted to have received all the required regulatory consents for the proppant squeeze operation at Wressle. When successfully completed, this will realise the full potential from the Ashover Grit reservoir and is expected to increase Egdon’s net production to 150 bopd at a time of increasingly strong oil prices leading to a step change in our cash flow.”
Simon Oddie, CEO of Europa, said: “I am delighted to report that all necessary consents have been received for the proppant squeeze. We can now proceed with the final stage of operations at Wressle to achieve optimum production levels from the Ashover Grit reservoir. All the data gathered to date points to production at Wressle-1 meeting the 500bopd target and in the process increasing Europa’s net production by 150bopd. Subject to the results of the upcoming operation, Europa’s overall production across all four of its producing UK onshore fields is set to be scaled up to over 200bopd. With oil prices trading above US$65 per barrel, Wressle will transform Europa’s financial profile.”
This is a good result for all three partners at Wressle and given the struggles they have gone through in recent years something we may not have even thought might happen. My confidence in responsible UK hydrocarbon production remains intact and includes IGas who are also in a strong situation.
Prelims from Trinity this morning in which they reported revenues of USD 44.1 million (2019: USD 63.9 million) – reflecting the significantly lower average realised oil price in 2020. Cash operating costs were down 7% to USD 13.9/bbl (2019: USD 15.0/bbl).
Adjusted EBITDA of USD 12.3 million (2019: USD 21.8 million) was down 43% giving an adjusted EBITDA margin of 28% (2019 34%) or USD 11.4/bbl (2019: USD 19.8/bbl) with adjusted EBITDA after SPT & PT of USD 12.0 million (2019: USD 13.9 million).
Group operating break-even price was reduced by 24% to USD 20.1/bbl (2019: USD 26.4/bbl). Cash balance of USD 20.2 million (2019: USD 13.8 million) gave a net cash (cash minus USD 2.7 million drawn working capital facility) of USD 17.5 million (2019: USD 13.8 million) and cash plus working capital surplus of USD 21.7 million (2019: USD 17.3 million).
Average production volumes grew in aggregate by 7.3% to 3,226 bopd in 2020 (2019: 3,007 bopd) again this increase was achieved despite no new drilling during the Period. All these figures and hard work on the cost front has been for a good reason, as they say, despite being in a ‘pretty good state’ they are delivering for growth or creating a strategic framework to meaningfully scale the business.
To do this they have made an acquisition of Onshore 3D & 2D Seismic Data package, agreed an MOU with NGC to Explore and Develop New Energy Projects and established a partnership with a large international operator. They have continued a roll out of wellsite automation and the digitalisation of operations which are driving efficiencies and increasing recovery rates whilst reducing carbon emissions.
Since the end of the year the company has observed changes to Supplemental Petroleum Tax which will enhance returns from offshore ops, partaken in onshore licence renewals with Heritage and established a partnership with the University of the West Indies.
The acquisition of Onshore PS-4 Block further enhances Trinity’s contiguous acreage, again part of the broader strategy to drive scale and makes for substantial synergies from a financial, operational and technical perspective.
Continued momentum into Q1 2021 includes Q1 production levels ‘resilient’ with volumes averaging 3,107 bopd (Q4 2020: 3,202 bopd) a cash balance of UDS 20.0 million as at 31 March 2021 (unaudited) (USD 20.2 million as at 31 December 2020) despite increased investment in growth initiatives occurring in Q1 2021 and a more than useful average realisation of USD 52.3/bbl for Q1 (Q1 2020: USD 46.3/bbl).
Bruce Dingwall CBE, Executive Chairman of Trinity, commented:
“We are a forward-looking company focused on deploying new technologies and innovative approaches to generate increasing scale and returns from our existing assets, and on pursuing new development opportunities through acquisitions and partnerships. We believe that during the Period we have established a strong path for a step change in production, revenue, profitability and cash flow, and consequent re-rating opportunities, as the Company leverages relationships and development strategies to generate scale.
“While balance sheet strength and strong cash flow, along with prudent expense management and low-cost growth, remain the cornerstones of the business, given the number of growth initiatives now underway, 2021 will be a year of investment as we seek to advance current developments, identify new opportunities via the strategic partnerships we have recently entered into and pursue further low-cost appraisal and exploration targets.
“The current opportunity set offers scalability with numerous potential game changers in regards to our future production, revenue, profitability and cash flow profile.”
Last night it was the first leg of the important Championship play-offs where the Cherries beat the Bees 1-0 and the Tykes lost 0-1 to the Swans.
In the Prem tonight the Red Devils meet the Cottagers needing a win to secure 2nd spot with two games to go. The Saints play Leeds, the Seagulls host Champions the Noisy Neighbours and in the crunch tie of the evening Chelski in 4th position host the Foxes in 3rd position host a rematch of the Cup Final and again Leicester need to win.
This time of year we see comings and goings, Woy Hodgson is leaving the Eagles and apparently Harry Kane is open to offers at Spurs.